chapter  1
Keynes’s Policies in Theory and Practice
ByJames Tobin
Pages 9

History has contrived to call attention to John Maynard Keynes just when his diagnoses and prescriptions are more obviously credible than at any other time since the Great Depression of the 1930s. A strong case can be made for the success of Keynesian policies. Virtually all advanced democratic capitalist societies adopted, in varying degrees, Keynesian strategies of demand management after World War II. The disappointments of the 1970s—inflation, stagflation, recessions and unemployment resulting from anti-inflationary policies—discredited Keynesian policies. The reigning governments would neither adjust the exchange rate nor adopt expansionary fiscal measures. Keynes was therefore led for macroeconomic reasons to favor a general tariff, in effect a devaluation of sterling for merchandise transactions only. Keynes was ambivalent on monetary policy. For fifteen or twenty years following publication of The General Theory, many economists, more in England than America, used the authority of the book to dismiss or downgrade the macroeconomic importance of money.